Markets to start the New Year on a cautious note

Indian markets ended lower on Friday as investors booked profit on the last trading session of 2023 with an aim to avoid any potential global risks over the weekend. Today, the start of the new, week, month and year is likely to be a bit cautious amid a lack of triggers from overseas with most global markets remaining shut. There will be some cautiousness as the output of eight key infrastructure industries - known as the core sector - slowed to a six-month low of 7.8 per cent in November on the back of a high base and festival holidays. Besides, data released by the Controller General of Accounts showed that the central government's fiscal deficit widened to Rs 9.07 lakh crore in April-November from Rs 8.04 lakh crore in April-October. At Rs 9.07 lakh crore, the fiscal deficit for the first eight months of the current financial year accounts for 50.7 percent of the full-year target of Rs 17.87 lakh crore. However, sentiments will get a boost later in the day as the finance ministry expects the Indian economy's GDP growth rate in 2023-24 to comfortably exceed its forecast of 6.5 percent following the blockbuster data for July-September. It added that despite declining in H1 of the current fiscal, FDI inflows to India are expected to rebound on account of strong macroeconomic fundamentals, favourable business environment and rising growth, in the coming months. Some support may come as data released by the Reserve Bank of India showed that India’s foreign exchange reserves rose by $4 billion to $620 billion in the week ended December 22. In the current calendar year, the central bank has added $57.59 billion to its kitty as of December 22. Also, in a remarkable comeback, foreign portfolio investors (FPIs) have pumped Rs 1.7 lakh crore into the Indian equity markets in 2023, propelled by confidence in the country's robust economic fundamentals amid a challenging global landscape. There will be some reaction in road & infrastructure industry stocks after Union minister Nitin Gadkari said the government has sanctioned Rs 1,170.16 crore for 29 roads projects in Ladakh. Gems and jewellery stocks will be in limelight as GJEPC said the overall gem and jewellery exports witnessed a on-year decline of 4.52 per cent in November to Rs 19,018.180 crore ($2,263.34 million). Meanwhile, auto stocks will be in focus today, on declaring their monthly sales number for December.

The US markets ended lower on Friday as investors eyed easier monetary policy in the year ahead. Asian markets are closed on Monday on account of new year holiday.

Back home, snapping a five-session rally, Indian equity benchmarks ended lower on the final trading session of 2023, due to a drop in Oil & Gas, Energy and PSU stocks. The indices made a negative start and stayed in red for whole day as traders were concerned with the RBI’s Financial Stability Report stating that the increase in risk weights for personal loans and loans to non-banking financial companies (NBFCs) may lead to a decline in the capital adequacy ratio of 71 basis points (bps) of the banking system. Some pessimism also came as Shashanka Bhide, one of the three external members of the Monetary Policy Committee (MPC), flagged a weak consumption demand as a key vulnerability for growth in the second half of the current fiscal as well as the next financial year. However, losses remained capped as traders took support with Assocham’s statement that India is likely to remain the fastest-growing major economy in the world in 2024 on the back of strong consumer demand leading to a pick-up in investment across sectors such as construction, hospitality and infrastructure including railways and aviation. Some support also came with report that the government is working on boosting domestic manufacturing and increasing exports to $500 billion by 2030 from 10-11 sectors. The 11 sectors are auto components, automobiles (including EVs), capital goods, chemicals, drones, medical devices, aerospace and defence, leather and footwear, textiles, and space. Overall, the ministry is looking at taking the country's goods and services exports to $2 trillion by 2030. Besides, commerce and industry minister Piyush Goyal said the National E-commerce Policy is in final stages of discussion and will be announced soon. Finally, the BSE Sensex fell 170.12 points or 0.23% to 72,240.26 and the CNX Nifty was down by 47.30 points or 0.22% to 21,731.40.